MGT204 - Sales and Promotion: Distribution Factors in Furniture

This report analyzes the inbound, outbound, and reverse distribution factors for a New Zealand-based business that manufactures and distributes flat-pack wooden furniture sourced from China. The analysis covers various aspects such as transportation methods, inventory management, warehousing, and communication strategies. The report identifies cost inputs, including fixed and variable costs, and provides a framework for setting a recommended retail price (RRP) for the furniture products. It also emphasizes the importance of efficient reverse logistics, including returns management and customer communication. The document, contributed by a student, is available on Desklib, a platform offering study tools and resources for students.

Running head: SALES AND PROMOTION
Sales and Promotion (Assignment 2)
Name of the University:
Name of the Student:
Authors Note:

1SALES AND PROMOTION
Executive Summary
The business of New Zealand than adds value through product assembling prior to employing
distributors to the retail supply outlets. Considering this case scenario, the objective of the report
is to analyze the inbound and outbound distribution factors that must be considered in that can be
applicable for this product at several stages. The report revealed that in the flat pack wooden
furniture products reverse distribution process the finished furniture goods can move from
consumer to the distributors or the manufacturer. For distinctive flat pack wooden furniture
products such as handicraft furniture and ergonomic office chairs the company can set high retail
prices as they are unique and offered with high quality in the marketed greatly appreciated by
consumers.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Identification of the Inbound Distribution Factors......................................................................3
3. Identification of Outbound Distribution Factors.........................................................................5
4. Identification of Reverse Distribution Factors............................................................................6
5. Identification and Discussion of Cost Inputs...............................................................................8
6. Approach of Setting Recommended Retail Price (RRP)...........................................................11
7. Conclusion.................................................................................................................................13
References......................................................................................................................................15

3SALES AND PROMOTION
1. Introduction
A consumer-centric logistics is observed to be associated with the manufacturing of flat
pack wooden furniture products within China for a business based in New Zealand. The business
of New Zealand than adds value through product assembling prior to employing distributors to
the retail supply outlets (Bortoluzzi, Chiarvesio & Tabacco, 2015). The products sold are
claimed to be of good quality and medium priced furniture. Considering this case scenario, the
objective of the report is to analyze the inbound and outbound distribution factors that must be
considered in that can be applicable for this product at several stages. Moreover, the reverse
distribution factors will be identified that will be involved in feting the products supplied to the
target consumers and based on this associated fixed and variable costs will also be distinguished.
In addition all the cost outputs will also be evaluated in developing set of recommendations
regarding suitable retail price to be set for these furniture products.
2. Identification of the Inbound Distribution Factors
Inbound logistics or distribution factors for the furniture products offered can include
medium employed for transport, store and delivery of goods offered by the business. Considering
the most suitable inbound distribution factors can facilitate the furniture company in maintaining
effective supply chain management and maximize the reliability along with efficiency of the
distribution networks that can further decrease the storage and transportation costs (Bosch,
Verploegen, Grösser & van Rhijn, 2017). The inbound logistics factors for successful
distribution of the furniture products involves information integration, shipping costs, stock
clearances, port handling and domestic transportation. Managing these factors in the inbound
logistics is focused on delivering the furniture materials at very minimum costs.

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Inbound logistics factors includes storage and distribution of war materials from suppliers
to manufacturing facilities, sourcing raw materials effusively, tracking inventory and moving
furniture goods from the suppliers to the stores, warehouses or manufacturing plans (Fontaine,
Crainic, Jabali & Rei, 2017). For instance, the flat pack wooden furniture products can employ
domestic transportation structures through common truckload and LTL carriers after carrying out
a packaging performance test to minimize damage. Specialized furniture carriers can also be
employed in the inbound transportation process that can include non-automated handling carriers
and air-ride trucks.
Domestic inbound transportation strategies for the flat pack wooden furniture products
can also consider implementing hybrid approach for its deliveries from Chin to New Zealand
(Liberatore & Miller, 2016). In this inbound transportation strategy the company can consider
employing less cost loop carriers which can consider the factor of consolidating order for several
deliveries in major markets. Other factors include delivery personnel interface with the
consumers and they are required to be well-trained in offering products to consumers.
Inbound distribution factors for flat pack wooden furniture products also considers
factors related with automation of the forecasting process as purchase orders are relied on
forecasts associated with holdings costs, lost sales along with consumer dissatisfaction (Mäkinen
& Broström, 2016). Raw materials for manufacturing these furniture will be sourced from China
locally that can be easily transported to its manufacturing unit placed in Shanghai and can also
avoid high import taxes. Factors related with managing the import taxes of raw materials can be
controlled that can facilitate in sourcing and manufacturing furniture products in China and then
transporting them to New Zealand at affordable prices. The company can also consider

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cooperating closely with the suppliers in designing flat pack wooden furniture products and
coordinating inbound logistics (Rouquet, Goudarzi & Henriquez, 2017).
3. Identification of Outbound Distribution Factors
Outbound logistics or the distribution factors for the furniture products considers
maintenance of efficient flow of the finished goods from the company to its consumers in which
the transportation of thee finished good factors are broadly associated with consumer service and
distribution channels. For instance, the flat pack wooden furniture products transportation can
employ an in-house team to handle stocking, packing and delivered these products and outsource
them to a service logistics company (Sakai, Kawamura & Hyodo, 2017). Assembling furniture
products can also be considered as a vital factor by the company in maintaining its outbound
logistics highly efficient. For instance, the flat pack wooden furniture products will be
manufactured in a manner that they are self-assembly furniture which can make transportation
processes highly convenient and packaging highly comfortable for the consumers.
The outbound distribution process for the furniture product will start from sales
department receiving a purchase order from the consumers, sales department checking
availability of inventory for order fulfillment, sales department sending consumer order to
warehouses for picking and packaging, order shipment and collecting cash for the order
(Shaharudin et al. 2017). In case of the flat pack wooden furniture products, transforming flat
products from manufacturing units to consumers will optimize space during transpiration and
storage. For instance, flat packed wooden Sofa will be shipped in a self-assembled manner so
that they can cram into a limited space that cab decrease packaging and distribution costs.
Another instance is the flat pack wooden kettle can be stacked in an upside down manner within

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the boxes that can facilitate in using the wasted space through storing more kettles in a box thus
decreasing packaging and distribution costs (Tombuş, Aras & Verter, 2017).
Another factor associated in the stages from manufacturing, packaging and shipping of
the flat pack wooden furniture products is maintenance of the lead time, where a great emphasis
is put on ordering and the distribution methods of these products. The focus of the company is on
decreasing the lead time gradually through maintaining an “Order Point Distribution Centre
(OPDC)” in maintaining progressively shorter lead times that can decrease from weeks to days
with the production and goods delivery are being triggered by orders (Yousef & Jarno, 2016).
High lead times can increase costs involved in the flat pack wooden furniture products
manufacturing and delivery process. In decreasing such costs, it can be ensured that the suppliers
are able to attain decreased lead time they can explore the possibilities of decreasing the
distribution link out of the chain in a way that that the retail stores in New Zealand can deal
directly with the manufacturing unit in China. Moreover , in making its outbound distribution
process more effective suitable supply factor can also be considered by the company where in
packaging and shipping process of the flat pack wooden furniture products, use of plastic bags
can be replaced with reusable ones (Yousef & Jarno, 2016).
4. Identification of Reverse Distribution Factors
Generally the logistics activities deal with events that transports finished products to
consumers. However, in case of reverse logistics, the resources move one step back within the
supply chain (Tombuş, Aras & Verter, 2017). For instance, in the flat pack wooden furniture
products reverse distribution process the finished furniture goods can move from consumer to the
distributors or the manufacturer. There are certain factors that impact successful implementation

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of reverse distribution process in the flat pack wooden furniture products distribution and they
are indicated below:
 Having a clear and visible system in place in ensuring a real-time distribution factor
tracking and monitoring: The flat pack wooden furniture products reverse distribution
can follow a simple process for furniture products that consumers desire to return. The
company must differentiate consumer queries relied on scenarios like damaged,
defective, and not available and wanting a different product and ship products back to the
manufacturing unit (Tombuş, Aras & Verter, 2017).
 Outsourcing logistics to the 3PL vendors: In maintaining reserve distribution efficient
the flat pack wooden furniture products distribution process can consider developing
systems through which keeping a real time tracking of reverse shipments from consumers
can be maintained along with decreasing investment costs in the return management
process.
 Selecting the distribution centers in New Zealand and warehouses in China in
managing the reverse logistics: This factor is considered to be most important in the
reverse logistics process, for which the furniture manufacturing company must
strategically decide locations of the return or collection centers (Tombuş, Aras & Verter,
2017). For instance, in reverse distraction process of the flat pack wooden furniture
products the return center locations can be based on the product costs and the reason for
returns. For instance, damaged or defective flat pack wooden furniture products will go to
the inspection center placed in New Zealand where they will be inspected and based on
that actions will be taken. Conversely, if the flat pack wooden furniture products returned

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by consumers are in the re-use state it will be send to the distributing Centre based in
New Zealand for re-sale.
 Maintaining effective communication with the consumers at the time of the
furniture product return process: Communication is considered as another vital
reserve distribution factor that can generate trustworthy relationship between consumers
and the furniture company (Tombuş, Aras & Verter, 2017). In making the reserve
transportation process efficient the flat pack wooden furniture products return from
consumers will be handled with maintaining constant interaction with consumers and
informing them about the status of their return and possible solutions to their queries.
5. Identification and Discussion of Cost Inputs
The cost inputs considers identification of all the costs or expenses experienced in all the
steps of manufacturing the flat pack wooden furniture products for getting the products delivered
successfully to the consumers. This involves segmenting costs experienced in manufacturing the
flat pack wooden furniture products into fixed and variable costs (Bortoluzzi, Chiarvesio &
Tabacco, 2015). Cost inputs in all the stages of the manufacturing process can include expenses
associated with raw materials, labor, consumable manufacturing supplies, and general overhead,
packaging and shipping expenses.
Variable costs that are considered to be experienced in the manufacturing process of the
flat pack wooden furniture products incudes direct materials such as kilograms of wood and
direct labor such as labor hours. Fixed costs that are considered to be experienced in the
manufacturing process of the flat pack wooden furniture products incudes rent of manufacturing

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unit paced in China, advertising, insurance and depreciation costs (Bortoluzzi, Chiarvesio &
Tabacco, 2015).
The estimated cost inputs for the flat pack wooden furniture products manufacturing
process are indicated in the table below.
Cost Items
Furniture’s
TotalA B C
Sales and production (units) 300 100 50 450
Raw materials usage (units) 35 20 40 14,500
Direct materials cost ($/unit)
$
22.75
$
13.00
$
26.00
$
9,425.00
Direct labor hours (hour/unit) 5 6 3 2,250
Direct labor cost ($/unit)
$
67.50
$
81.00
$
40.50
$
30,375.00
Machine hours (hour/unit) 4 2 5 1,650
Number of production runs (runs/total
units) 6 2 1 9
Number of deliveries (deliveries/total
units) 3 5 10 18

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Number of receipts (receipts/total units) 4 4 1 9
Number of production orders (order/total
units) 2 5 10 17
Total area in warehouse (ft2) 25000 15000 10000 50,000
Overhead costs $
Set up 5,000
Machines 6,500
Receiving 6,500
Packing 8,500
Engineering 6,500
Insurance 4,500
Utilities 15,500
Total

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53,000
Total overhead ($) 53000
Number of hours 2250
Labor rate ($/hour)
23.5555
6
cost per unit
Cost A B C
Direct materials
($/unit) 22.75 13 26
Direct labor ($/unit) 67.5 81 40.5
Overhead ($/unit)
117.777
8
141.333
3
70.6666
7
Cost/unit
208.027
8
235.333
3
137.166
7
6. Approach of Setting Recommended Retail Price (RRP)
Pricing strategies set for the furniture products must consider setting prices slightly high
than the cost of goods sold or just a bit higher than the competition. Using simple pricing
approaches in setting prices for furniture products for distributing these in the retail stores can
increase profit margin of the New Zealand based furniture manufacturing company (Bosch,
Verploegen, Grösser & van Rhijn, 2017). Based on the inbound, outbound and reverse